The dollar powered its way through the FX market rising against all the major trading partners with the dollar index breaking above the 95.00 figure. There were no particular triggers to the move save for the fact that PBOC was continuing to devalue the yuan. USDCNY climbed to 6.775 in Asian session trade – it’s highest reading in almost a year.

Lower yuan will make exporting to China more expensive and may be one way that Chinese officials are fighting the trade war with Trump. Certainly, the move spooked FX traders tonight with Aussie suffering a near 100 pip turnaround as a result.

In early Asia, AUDUSD was well bid hitting a high of .7440 in post news reaction to much better than expected AU Labor numbers. Australia generated 50.9K jobs versus 16K eyed. The gain was evenly split between full time and part time jobs indicating that the labor market Down Under remains robust. Over the past year trend employment was up by 2.8% versus long-term average of 2.0%. But all the good news was for naught as Aussie swamped the pair on worries over China devaluation and send the unit tumbling to a low of .7355. For now, the .7300 support in the pair remains solid, but a break of that level would suggest a possible test of .7000 as trade war fears escalate.

In Europe the focus was on sterling as UK Retail Sales missed badly printing at -0.5% versus 0.2% eyed. The miss was deep across the board with core retail sales coming in at -0.6% versus 0.1% forecast. The pair plowed through the stops at 1.3000 hitting a low of 1.2982 in the immediate aftermath of the release. But so far, the pair has failed to make fresh lows with UK rates markets barely budging on rate hike expectations for August. As some analysts have pointed out despite the weaker than expected printed, overall Retail Sales were up nearly 3% on a year over year basis with Q2 showing a clear rebound in consumer demand, Still, the overall economic picture from UK suggests a “one and done” as the absolute best scenario on the monetary front and that is unlikely to provide cable with much momentum for the time being, especially with no progress on Brexit being made.

In North America today the calendar is quiet and the key question is whether the dollar rally will extend into US trade. All three major pairs are at key support and resistance point with USDJPY wavering around 113.00 cable trying to hold 1.3000 and euro back to 1.1600 a full breakout here would suggest that markets have digested Powell’s testimony have decided not to fight the Fed.